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ONeil Enterprises produces a line of canned soups To e hof b co55 the country.. Demand ras d py o aung at e pacily. The cpny s co eng aropping barley, in hopes of improving profita barley is dropped, the revenue associat be lost and the related variable costs saved. Th CFO estimates that e fixed costs reduced by 25 percent. The following product line statements are available: Beef Barley $46,700 Product Broth Minestrone $55,100 Sales $36.600 Contribution margin 12 400 $13.300 $ 5.500 Fixed costs allocated to each product line 7 300 8.600 9,700 6 000 $(3,100) 2.700 Operating profit (loss) Required: a-1. Complete the following differential cost schedule Difference (all Alternative: Drop Beef Barley Status Quo lower under the alternative) Revenue Less. Variable costs Contnbution margin Less: Fixed costs Operating profit (loss) b. When the product manager for the minestrone soup hears that managers are considering dropping the beef barley line, she polnts out that many O'Nell customers buy more than one soup flavor and If beef barley Is not available from O'Neil, some of them might stop buying the other soups as well. She estimates that 10 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped b-1. Complete the following differential cost schedule. Difference (all lower under the alternative) гор Status Quo Beef Barley Revenue Less. Variable costs Contribution margin Less: Fixed costs Operating profit (loss)

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Solution: Alt. Drop Difference Status Quo a)1 Beef (36600+46700+55100) (23300+41200+42700) 138400 $ 91,700 $ 107200 $ 66,000 $ 31,200 $ 25,700 $ 25,600 19,200 $ 5,600 $ can be +/ -41,200 Sign can be +/- -5,500 Sign can be +/- -6,400 Sign can be +/- 900 Sign can be +/- -46,700 Sign Revenue Less: Variable costs Contribution Margin $ Less: Fixed Costs (7300+8600+9700) 75% Operating Profit (loss) 6,500 $ $ Alt. Drop Difference Status Quo b)1 Beef -55,870 Sign can be +/- -47,800 Sign can be +/- -8,070 Sign can be +/- -6,400 Sign can be +/- -1,670 Sign can be +/- (36600+46700+55100) - (36600+55100)*10% 138400 $ 82,530 $ 107200 $ 59,400 $ 31,200 $ 25,600 $ $ Revenue Less: Variable costs (23300+41200+42700)- (23300+42700)10% Contribution Margin $ 23,130 19,200 $ 3,930 $ (7300+8600+9700)*75 % $ Less: Fixed Costs Operating Profit (loss) 5,600 $